President Joe Biden’s Crypto Regulations: Crucial Step in Digital Currencies Adoption

On March 9, 2022, President Joe Biden signed an executive order to mobilize the federal government to create a strategy for digital assets like cryptocurrencies that promote innovation in the industry while minimizing risks to Americans and the global financial system.

Wednesday’s executive Orde tasks federal agencies with researching and developing policy recommendations on cryptocurrencies. It might seem like an insignificant step, but it’s crucial in digital-currency adoption.

The adoption will help cryptocurrencies like ether and bitcoin pare recent losses. The value of all cryptocurrencies was $1.9 trillion on March 9, 2022, down roughly 36% from an all-time high above $3 trillion in November. The market cap of bitcoin was $745,565,932,766 on March 09, 2022, down more than 50% from its all-time high above $300 billion in 2021.

A Glossary to Help you Make Sense Of Biden’s Executive Order

The institution’s adoption lifted cryptocurrencies to meteoric highs last year. But the absence of centralized governance became a source of concern for numerous top U.S. officials. The concerns aren’t new in the industry since the harsh government regulations have previously rocked the immature market.

Despite the lack of regulation, SEC Chairman Gary Gensler has repeatedly stated that cryptocurrencies demand more official investigation, mainly because they can implicate securities, commodities, and banking laws.

Last year, Gary urged Congress to strengthen its regulations in the bitcoin industry. “We simply don’t have enough investment protection in crypto right now,” he stated. “To be honest, it’s more like the Wild West right now.”

For the past few months, the White House has been looking into the matter, and on Wednesday, President Biden took a significant step toward regulating cryptocurrency. It’s a move that some experts described as ‘long overdue.’

“In my opinion, it is long overdue. The U.S. is lagging behind most of the western world in developing a regulatory and legislative framework for blockchain in general and crypto specifically. There has been significant interest from regulators like the SEC, the Treasury, and the Commodity Futures Trading Commission in regulating the space. However, there’s a lack of clarity and understanding of what is in whose jurisdiction to regulate and even how to approach cryptocurrency.” the founder of SPiCE VC, Tal Elyashiv, said.

The Key Crypto Regulations Addressed in Biden’s Executive Order

Wednesday’s executive Order, which was expected since October 2021, will establish “key regulations” for the administration that will help assess digital assets and the global economy. The regulations are;

Protect Crypto Investors

An administration official noted crypto’s volatility as one concern that might affect investors, noting that bitcoin’s (BTC) price during the beginning of the COVID-19 epidemic was roughly $10,300. The price reached a high of almost $70,000 in November before dropping in the fall of 2021 and the beginning of 2022.

The official stated that investor protection is a top priority since several high-profile investors have been burned by cryptocurrency in recent years. Understanding the technology that underpins digital assets will be a part of this endeavor. Another aspect will be comprehending the current financial system’s flaws and which regions do not serve all consumers.

According to Biden’s crypto regulations, the Department of the Treasury and other agency partners should review and create policy recommendations to address the effects of the expanding digital asset sector and changes in financial markets for consumers, investors, businesses, and modest economic growth.

The white house order also encourages regulators to maintain adequate control and protect against any systemic financial risks that digital assets may pose.

Protect The National Security

The (FBI) Federal Bureau of Investigation and the U.S. Department of Justice have relatively young departments dedicated to cryptocurrency crimes. According to the press release, the departments will focus on crypto exchanges, mixers, tumblers, and other digital asset infrastructure providers that could enable “criminal exploitation of cryptocurrencies.”

The developers of most cryptocurrency networks theoretically design their systems to make identification more complex and more decentralized. It means that the government cannot track funds making it easier for illegal transactions. To address this, the presidential order “represents a continuation” of the United States’ development efforts to establish international financial and technology standards.

Biden’s Order also instructs agencies to collaborate with the U.S. allies and partners to ensure that international frameworks, capabilities, and relationships are coordinated and responsive to national security risks posed by the illicit use of digital currencies.

Look into the U.S. Central Bank Digital Currency (CBDC)

More than a hundred countries are already looking into Central Bank Digital Currency (CBDC), with use cases encompassing local and international transactions.

Biden’s crypto regulations placed an urgency on researching and developing a potential United States CBDC, should issuance be deemed in the national interest.

The directive aligns with the Federal Reserve’s continuing research into digital dollar issuance. The central bank’s branches have released several reports in recent months, examining the regulatory and technological issues that must be addressed before the central bank digital currencies (CBDC) are created.

The regulations orders the U.S. government to analyze the technological infrastructure and capacity requirements for a prospective US CBDC in a way that preserves the interests of Americans.

With implications of the U.S. Dollar in the global financial system, Biden’s crypto regulations will ensure that the U.S government has a leadership role and a seat at the crypto table.

Protect Global Financial Stability

One of the top priorities is to protect global financial stability. The executive Order encouraged the Financial Stability Oversight Council to identify and manage global economy financial risks presented by digital assets and provide suitable policy proposals to fill any regulatory gaps.

 The Order tasked agencies to study how people use cryptocurrencies and whether they pose a risk to the stability of the American and global financial systems.

Prevent Illicit Finance Uses

The president’s Order comes as global regulators scrutinize cryptocurrencies used to finance everything from drug sales to terrorist attacks.

In the U.S, Treasury Secretary Janet Yellen has called for tighter digital currencies regulations to prevent their use in criminal activity. The Justice Department is also investigating several high-profile cases involving cryptocurrency fraud.

Promote American Innovation and Leadership

The Order asks agencies to identify gaps in digital assets’ research and development then recommend policy actions to fill those gaps. It also directs agencies to work with the private sector to develop best practices for using, trading, and protecting cryptocurrencies.

Biden crypto regulations urge government agencies to establish policies against risks and guide responsible innovation with U.S. partners and allies. This is to develop aligned international capabilities that respond to national security risks and with the private sector to study and support technological advances in digital assets.

The president’s Order will promote American innovation in an area where China has taken the lead. Beijing has been aggressively promoting blockchain technology and has even developed its own digital currency, the e-yuan.

Ensure Proper Consumer Protection

The Order asks agencies to develop a plan to educate investors about the risks of digital assets and protect Americans from fraud and other crimes related to cryptocurrencies.

Biden also instructed the U.S. government to investigate and assist technological advancements in the responsible development and implementation of digital asset systems, focusing on privacy security, preventing criminal exploitation, and mitigating negative climate impacts.

The Biden crypto regulations also direct the Treasury Department to develop guidance on how federal consumer protection laws apply to digital assets.

The Consumer Financial Protection Bureau has already taken action against several cryptocurrency-related schemes, including an alleged $600 million Ponzi scheme.

Develop Safe and Affordable Financial Services.

The crucial need for secure, affordable, and accessible financial services is a critical national interest in the United States. The Order instructs agencies to identify opportunities for digital assets to provide such services.

Cryptocurrencies hold the promise of reducing costs and expanding access to financial services, particularly in developing countries. It is envisioned that agencies will research implications of distributed ledger technology on consumer protection, anti-money laundering safeguards, and other areas related to safety and soundness.

In collaboration with other agencies, the Secretary of the Treasury will produce a report on the future of money and payment systems. This will include implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence that future.

Crypto is Here to Stay; What Does it Mean for Everyone?

The Executive Order’s release means that cryptocurrency is here to stay. The United States is taking it seriously as an asset class and a potential disruptor to the financial system.

It’s a massive relief that the U.S. government is taking a more cautious approach and generally accepting digital assets as the cornerstone of the future financial system. For a reason, the executive Order sparked a massive rally in the crypto markets: regulatory clarity on digital assets would be highly beneficial to the business.

Investors have seen a change since the White House announced that president Biden would sign an executive order on crypto.  Bitcoin climbed up 9%, above $40,000, and Ethereum’s price saw an immediate boost as well.

The administration’s move may cause some disruption and volatility in the cryptocurrency market in the short term.

Fundamentally, an American approach to digital assets supports innovation while minimizing risks to consumers, investors, and enterprises, a broader financial system, as well as more extensive financial stability and environmental concerns.